New Mortgage Rules Overview How will it Affect the Real Estate Market? in Toronto and The GTA


Finance Minister Jim Flaherty new mortgage rules are being aimed at stopping housing speculators and ensuring homebuyers can adequately handle their debts when interest rates inevitably rise.  Some predict the rates to start climbing as soon as June. 
Mr. Flaherty stressed that Canada's real estate market is healthy, and that the new rules, which take effect April 19th, would stop “negative trends” from development.
It is obvious that many of the new condo developments were swooped up massively by speculators, leaving little inventory for the average buyer that planned on living in the unit, and not renting it out.

For most consumers, the new mortgage changes are unlikely to make it harder to get a mortgage but it could reduce the size of the mortgage an individual consumer can negotiate with a lender. And they might have to look at buying slightly less expensive properties.

People buying real estate for investment purposes including those looking for rental properties may find it harder to get into the market as they have to shell out more money form their own savings.  But that might not be such a bad thing.   More of a down payment will mean quicker positive cash flow and security for the investor.

Some volatility is expected in the housing market in the short term as home buyers rush to beat the April 19th date. After that, the activity will likely fade because so many buyers moved up their purchases. This could end up softening the sharp year-over-year price increases that have been characteristic in many cities recently.

The economic implications of this rule change are unlikely to be severe, and we expect the housing market to slow its ascent without crashing down.   Perhaps house prices will increase at a slow rate, which most consumers will welcome.  Slow and steady creates a more relaxed environment for both buyers and sellers.

Here is a quick look at the changes which apply to government-backed insured mortgages:

1. Borrowers must now qualify based on a five-year fixed rate even if they choose a mortgage with a lower interest rate and shorter term.

The government’s rationale for this change is that it will help borrowers prepare for higher rates, although it may squeeze the purchasing power of home buyers. It remains unclear whether borrowers must qualify at the five-year posted rate or the five-year discounted rate.

2. The maximum amount Canadians can withdraw in refinancing their mortgages will be reduced to 90% of the value of their homes, instead of 95%.

This change will help ensure home ownership is a more effective way to save. The impact of this change is expected to be minimal as relatively few homeowners withdraw equity from their homes to this extent.

3. A minimum down payment of 20% will be needed for government-backed mortgage insurance on non-owner-occupied properties

“purchased for speculation,” which realistically means rental properties. While this measure is intended to hamper the speculative buying of properties by reducing the leverage of buyers, it will also impact those buying real estate for general investment purposes

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REAL ESTATE SNATCH is the independent real estate blog of Samir Safadi, Sales Representative of West-100 Metro View Realty Ltd, brokerage it is dedicated to covering Real Estate News, digital culture, social media and technology, providing analysis of trends, Market Data , reviewing new development. Offering Real Estate services resources and guides. Services are provided to prospective buyers and sellers of real estate by Samir Safadi, Sales Representative, West-100 Metro View Realty Ltd, brokerage, duly registered in the province of Ontario, under Real Estate and Business Brokers Act, 2002 (REBBA 2002) and Member in good standing with



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